Will 3G save the phone repair industry?

As Vodafone bids for space in Santa’s sack with the long-awaited launch of 3G mobiles, it could be a long awaited Christmas present for a sector of the mobile industry which has been having an utterly miserable time.

Nokia’s repair outfits have seen catastrophic falls in business, as the Finnish giant finally gets to grips with its reliability issues.

2001 and 2002 were bonanza years for Brummie outfit NSH Techlogistics, as the company did £60m and £52m of business respectively. However, business in 2003 looked slimmer than Bob Cratchett on Christmas Eve, as turnover slumped to £23m for 2003. Nokia phones, it seems, just aren’t as crap as they used to be.

The company’s accounts drily note that: “The business saw a downturn in product volume for service, mainly due to reliability of product. The industry in general is suffering the same plight.”

One of NSH’s rivals, CRC Group, is similarly suffering from the drought of dud phones.

CRC’s accounts state: “The level of sales transacted with Nokia, CRC’s largest customer, reduced by £45 million compared to 2002 as a result of the improved reliability of Nokia mobile handsets and changes made to the service management contract between CRC and Nokia.”

This is quite a hit for a company with turnover of £109m. Things have got so bad for CRC that it had to shut down a repair facility in Rugby last year.

The picture isn’t as simple as it seems, as the numbers are also affected by changes in the organisation of Nokia’s reverse supply chain, and the volume of phones sold. Nonetheless, the underlying picture is pretty clear.

2002 was the year that smart phones began to appear on the market in volume. And being an order of magnitude more complex than their predecessors, it’s not surprising that they were more liable to going kaput.

In April 2002, The Carphone Warehouse suspended sales of the newly released Nokia 8210 as punters returned them to the stores in droves. That year Dresdner Kleinwort Wasserstein analyst Per Lindberg published a research note suggesting that reliability problems could cost the company £92m per quarter.

“What happened was that Nokia suffered an epidemic failure of certain components. That provided a bubble of work for the phone repair companies, and things came back to normal in 2003,” Alan McLaughlin, CEO of the CRC Group, told The Register.

“The phones being sold are more complex, with cameras and Bluetooth and so on. And despite huge efforts, and great success to achieve high reliability, the inevitable fact is that when you have new tech being taken to market as quickly as it is and changing as fast as it is, that leads to a higher rate of return.”

Happily for it, but unhappily for customers, the mobile phone repair industry is looking forward to healthier times on the horizon.

“With the introduction of new devices entering the market place we should see a return in service volumes but not until 2005,” says the report from NSH, whose directors declined to comment for this story. That should be more or less when 3G phones will hit the market in volume.

“2005, with the imminent arrival of 3G from Vodafone and later others, will be a good year for the phone repair business,” says CRC’s McLaughlin.

Nokia, however, doesn’t see it this way. Company spokesman Mark Squires welcomed the improvement in reliability. “We were cast iron, now we’re cast diamond,” he said.

But he conceded that a rise in repair volumes wasn’t impossible, but that it could be a result of other factors. “3G is a new tech but we have been making 3G handsets for a while. It’s not as it was when we went from analogue to digital. This change doesn’t fundamentally alter the construction.”

The problems may also be down to the increasingly large amount of third party software downloaded onto phones, he suggested.

Or it could just be the popularity of phones. “An awful lot more people may be buying phones than there has been. So by default there will be a lot more work [for the repair companies],” he said.

However, the rise in faults could have started already. “Handset repair volumes showed a modest increase in the second half of 2003,” says CRC’s report.